Content on this page requires a newer version of Adobe Flash Player.

Section 179 FAQs

FAQs - Section 179 Deduction & Bonus Depreciation

What is the Section 179 Deduction?

Section 179 of the IRS Tax Code allows a business to deduct, for the current tax year, the full purchase price of financed or leased equipment and off-the-shelf software that qualifies for the deduction. The equipment purchased, financed or leased must be within the specified dollar limits of Section 179, and the equipment must be placed into service in the same tax year that the deduction is being taken (for example, the equipment must be put into service between January 1st and December 31st of the year the deduction is to be taken.)

Did the Stimulus Acts have an impact Section 179?

The Section 179 limits have risen and fallen over the years, with Congress often making businesses wait before raising it with the various stimulus acts over the years. That ended in late 2015, when the PATH Act raised Section 179 to $500,000, and made it permanent. It also reinstated the 50% Bonus Depreciation on new equipment purchases, and also included escalators for inflation in future years.

What's the difference between Section 179 and Bonus Depreciation?

The most important difference is both new and used equipment qualify for Section 179 Deduction, while Bonus Depreciation covers new equipment only. Bonus Depreciation is useful to very large businesses spending more than whatever Section 179's spending limit is for that year. Also, businesses with a net loss in a given tax year qualify to carry-forward the Bonus Depreciation to a future year. When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation - unless the business has no taxable profit in the given tax year.

Can I lease (or finance) equipment and take the Section 179 Deduction?

Absolutely. In fact, this is a very effective strategy, as the deduction you take may actually exceed the total loan or lease payments you make for the year. See this page for info on equipment leasing and Section 179.

How do I know if the property I am purchasing or leasing qualifies for the Section 179 Deduction?

Does the date of my purchase have an impact on the Section 179 Deduction?

Yes. To qualify for the Section 179 deduction for any given tax year, the equipment must be purchased or leased and placed into service between January 1 and December 31 of that year.

Does the geographic area my business operates in make any difference in the Section 179 Deduction?

Perhaps. The IRS has identified several different areas of the country as special zones that qualify for an increased Section 179 Deduction. Some of the zones the IRS has identified include the New York Liberty Zone, Special Enterprise and Renewal Community Business Areas, and the Gulf Opportunity Zone. We have a page with more information regarding special Section 179 zones.

How can I calculate the potential savings that the Section 179 Deduction will have on my next purchase?

To elect the Section 179 Deduction you need to fill out 'Part One' of IRS form 4562 (available here). If you need help, your tax preparer will be able to help you elect the Section 179 Deduction.

get the latest news

This website was designed to answer your questions regarding the Section 179 Tax Deduction, and to explain the impact the various Stimulus Acts have had on Section 179. The information on this site will clearly explain the Section 179 Deduction in plain terms; will go over what property qualifies under Section 179 for the deduction; and will explore the myriad of ways the Section 179 deduction can impact your bottom line. In addition, there are IRS tax forms and also tools for you to use, such as the free Section 179 Deduction Calculator currently updated for the 2016 tax year.